Friday, September 08, 2006

360 Degrees of the Homebuilders

nach den letzten warnungen von bzh, kbh und len hat sich realmoney die mühe gemacht ein update in sachen homebuildern zu geben.
charttechnick hier:immobilienblasen: 360 degrees of homebuilder / cramer
mächte im hinblich auf jim cramer noch loswerden das der typ in deutschland am ehesten mit förtsch und co zu vergleichen ist und in sachen homebuildern wie die amis sagen würden ein "flip flopper" ist. bedeuted das er im wochenrythmus seine meinung wechslt und eigentlich nicht ernst zu nehmen ist. (auch wenn er hier zufällig meine meinung vertritt). kann sein das er heute nachdem die aktien der builder gestern wider erwarten gestiegen sind schon wieder massiv bullish ist.

Editor's Note: In this edition of "360 Degrees," RealMoney commentators take a look at the homebuilders. Despite earnings warnings and an ominous market outlook, the stocks have performed relatively well today. Have they fallen to bargain levels, or has the industry failed to acknowledge how deep its problems run?

Hold Off on This Homebuilder, by Jim Cramer

This column was originally published on RealMoney on Sept. 7 at 12:59 a.m. EDT
Have we reached a level with the homebuilders where they are at last immunized? Look at KB Home. Isn't that stock supposed to be plummeting? Everything the company said was bad.

Or is it cutting price and inventory enough that people are saying, "Core net worth, value" right here?

Here's my suggestion: Even if you think that it is bottoming, wait until tomorrow. You don't want to run into a downgrade -- you won't get any upgrades.

I'm leaning, though, toward saying, "Maybe something's being put in here. Maybe the Fed is about to cut, and they are done going down." That, plus this is a great company.

I like the idea that a stock of a company that says negative things isn't down. Let's see the close and hear the analysts tomorrow, and we will make up our minds on the basis of the Street evidence

Bringing Down the House, by Cody Willard

Housing's been front and center on my mind of late, as regular readers will know. The spiking inventories really have me concerned about how bad housing might get -- and get there sooner rather than later.

Last night after the close, more than one homebuilder warned the Street and guided lower, as KB Home and Beazer Homes each said business was bad. The Los Angeles Times quoted Robert Toll of Toll Brothers trying to admit that there's a harder-than-soft landing while attempting to say it won't be a collapse.

His rationale, as quoted in the paper:

"It appeared that we were no better prepared for floods than Bangladesh, and now that's been exacerbated by continuing bad news out of Iraq," Toll said. "It gets into the psyche of the American consumer."

The bullish line dismissing housing's problems often centers around how big corporations like Toll with their stoked balance sheets will somehow be better able to weather a major downturn than the so-called mom-and-pop shops that were crushed during the most recent crash. But I have to say, I am blown away by that shallow and what surely must be insincere commentary from Bob Toll. The housing downturn that might turn into a crash is certainly about a wee bit more than just the post-Katrina and current Iraq psyche of the American consumer.

Housing's really worrisome, isn't it?

What We Aren't Hearing From the Homebuilders

, by Dan Fitzpatrick This was originally published in Columnist Conversation on Sept. 7 at 1:23 a.m. EDT

This morning's comments from Ara Hovnanian of Hovnanian Enterprises about the current slowdown in housing were a bit interesting -- not because of what he said, but because of what he did not say. There's a lot of head-scratching going on about the inventory glut, mass exodus of the new-home daytraders and high cancellation rates. This was the type of thing I was referring to in
a recent article about some of the underlying dynamics of this business.

I laughed when I read Cody's earlier note about Toll Brothers President Bob Toll's remarks. Blaming the downturn on Katrina and Iraq? If you needed more evidence that the homebuilders continue to feign ignorance about the pickle they are in, now you have it.

Nobody seems to be acknowledging the obvious -- that the builders made hay while the sun was shining and sold their product for whatever the market would bear. It was a seller's market, so they maximized share value by maximizing sale prices. That's what a public company is supposed to do, isn't it? It's prudent, not greedy.

Houses aren't like computer technology. There is no "killer app" that can be introduced in a year or two and bring prior buyers back into the market. When you buy a home, it isn't made obsolete by a dual-core processor. You're typically not going to be buying another one for quite a while ... unless you sell the existing one. That makes the new purchase a wash, and it doesn't affect demand.

Also, builders build on the best land they can in terms of location. As those homes are built and sold, the next subdivision will likely be in a less desirable location. That leads to weaker pricing power, not stronger.

With so many "deep value" managers and analysts wowed by the apparent low valuations, the easy money has already been made by shorting these stocks, and there will always be an underlying bid to prop up prices. But I doubt there will be easy money made by holding these stocks for a long time.

As I write this, the homebuilders have retraced their losses and are moving higher on the day. But I think it's a sucker's play unless you are just buying to exploit a countertrend rally.



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